How many times have you requested for an NDA (Non disclosure agreement) to be signed and you get a reply assuring you to trust them?
Because well, they support your hustle and would do nothing to jeopardize it . Promises of an assured future.
Now let’s talk reality.
A duly signed NDA is very vital to you getting some assurance, that whatever information you deem confidential will be kept so…at least for a period of time.
See below what you should know about NDAs and making them work for you
To get your NDA signed, you need leverage.
Ask anyone who has tried raising money, asking investors to sign an NDA is almost always a bad idea.
This is not because you don’t have good reason to, but because they’ll generally refuse to sign one.
Active investors see about a gazillion ideas many of which are similar and some which may not be too original.
You might also come off looking like an amateur. A little research will tell you many VCs would prefer passing on a deal than sign an NDA.
Whilst all of this is true, bottom line is that they have the money and you don’t. You have no leverage to get them to sign an NDA.
You can guess how these three scenarios will work:
- Startup signs Microsoft’s NDA
- Two startups deliberate a bit before agreeing on a mutual NDA, or decide to save energy and skip it
- Microsoft and Google negotiate a master NDA for 1 year, and can’t start any individual project without spending three months building out an addendum to cover the specifics of that project.
It’s all about leverage.
If you are looking to patent your creation, you need an NDA
Here’s the first thing you need to have in mind: You lose your right to protection for a possible patent if it becomes public and executed by someone else before you patent it.
We get it. Sometimes you aren’t sure and you’d like a bit more time before commiting to something, but if during that wait period, the information goes public, it becomes too late to file for a patent.
A patent, obviously, is the best way to protect a truly great idea and should be filed as soon as is practical or possible.
But this isn’t the reality on ground.
Bringing a great idea to life requires support and chances are you’ll have to divulge some ideas and plans to a third party.
While reaching this stage is exciting, it’s also a time to be cautious and smart. NDAs are a great way to fill the void until your patent comes through.
A note of warning, an NDA cannot replace a patent. It is in no way sufficient. Consider the scenarios below:
You go to Big Brother Meat Pie (BBMP) company and have them sign an NDA about a new burger recipe your research lab has been working on.
In the NDA, they agree to keep everything you show them and your concept to themselves. They also agree they will not use the information for their own benefit.
Now imagine:
A. 6 months later, BBMP has put your super burger on the market exactly the way you discussed with them.
If you can prove exactly what you showed them after they signed the NDA was what they implemented into their super burger line, you can sue them for breach of contract.
- B. 6 months later, Big Sister Super Burger (BSSB) (which never existed and whom you never told your idea) has gone to the market with your super burger recipe.
Except in specific circumstance, you cannot sue BSSB because they never entered into an NDA with you. And, you cannot prove BBMP told them as well.
So, unless you can prove somehow that someone at BBMP violated your contract by leaking your idea to BSSB you won’t have any grounds to go after BBMP in court.
An NDA can be useful when the same person (or company) that signed the NDA goes ahead with the idea.
When you have a patent, however, even people who innocently come out with the same product could be held liable for patent infringement.
You can determine how long your NDA will last
If you have the leverage, then of course.
Most NDAs last for 2 to 5 years. However, once the information contained in the NDA is made public, regardless of who is responsible, your NDA loses it’s confidentiality and the signatories will be free to disclose the information.
Subject to it becoming public, you could specify that some information must be kept confidential forever.
A few examples include:
- non-patentable know-how
- lists of customers
- personal information about the individuals involved in a project
In summary
If someone comes to you asking for money, you have the leverage to make them sign an NDA. If there’s an information you don’t want getting to the public, you can be assured of its protection.
If you are the one asking for money or assistance, don’t go asking for an NDA, except you’ve got something really valuable to share.
You can determine how long you want your NDA to last.
So which is it for you? An NDA or a patent? Decide here